An Empirical Study On The Influence Of Political Relations Over Trade Between China And Big Powers

Since China's accession to the WTO in 2001,the volume of foreign trade increased each year.In 2017,China's foreign trade totaled 27.79 trillion yuan.With the increase of international exchanges,countries trade influencing factors become more unpredictable.Political relations among countries have gradually increased the frequency of interaction with trade.China has constantly been interfered with by major powers during the development process,and bilateral political friction has frequently appeared.USA recently chose to conduct a trade war with China against China's long-term trade deficit,imposed a tariff of $50 billion on China's major manufacturing products and additional tariff on $100 billion goods.China quickly listed its tariff list against the United States.Is this trade war caused by the deterioration of bilateral political relations?Can trade further deteriorate or ease bilateral political relations?It can be seen that there is a considerable degree of correlation between political relations and trade.Whether there is time lag in the impact of changes in political relations on trade,and whether political relations will affect trade after removing changes in the country's own policies?This paper will use the panel least squares estimation(OLS)and the fixed effect model for empirical analysis on the basis of existing literature research to verify the above problems.This paper analyzes the relevant conclusions of existing literature on the impact of political relations on trade and introduces political variables.Using the annual trade data between China and the major 10 trading powers from 1980 to 2016,the trade gravity model was selected to construct the panel data.The endogenous and robustness test of the panel data and the correlation analysis of the first-order difference of the variables are used to determine the robustness between the explanatory and explained variables,and to ensure that there is no correlation among the explanatory variables.According to the influence of variables on the time delay,the lag order is selected,and the empirical research is conducted through the least squares estimation and fixed effects.Besides,we will remove the impact of domestic policies,set the import and export of GDP proportion data as the explained variables,and use the OLS and fixed effects for panel model regression.The research results show that the political has a significant impact on trade.The strengthening of political relations can promote the development of trade,when two countries in a politically friendly period,the degree of openness in bilateral trade increases,and the trade between countries increases.While the deterioration of political relations would weakened bilateral trade,and political friction cause the countries to resort to trade resistance and to upgrade to a trade war.Excluding the influence of countries own economic and trade levels,the results show that China' s imports to major powers are affected to a greater degree.This also reflects that China,as a developing country,is currently in a weak position with major powers in trade due to the lack of advance technologies.After given the conclusion,this paper shows relevant policy recommendations for future trade between China and major power.